Discover Libya's Investment Potential in 2024 (Are We Foolish?)
The U.S. Department of State recently released its 2024 report on the investment climate in Libya, highlighting significant potential for attracting investments in the country, particularly in the oil, gas, electricity, and infrastructure sectors. However, the report also notes that investors face substantial challenges due to bureaucracy, institutional division, complex regulations, corruption, security threats, and the government's poor adherence to contractual obligations.
The report summarized the major obstacles that foreign investors encounter, which prevent them from entering the Libyan market:
- Ambiguity in rental markets.
- Lack of transparency in the issuance of licenses.
- Weak judicial independence and law enforcement.
- An unclear and non-transparent regulatory environment.
- Undefined roles of state institutions.
Many Libyans might view this report as an intrusion into Libyan affairs, and those who report on it could be accused of betrayal. However, as Libyans, shouldn't we examine our shortcomings to rectify them? The presence of abundant resources and potential in Libya, yet the failure to utilize them, constitutes a betrayal of the country and future generations.
Libya is considered one of the countries with significant potential to attract both local and foreign investments. Despite this potential, the country faces numerous challenges that hinder the achievement of this goal. The U.S. Department of State's 2024 report on the investment climate in Libya merely sheds light on these opportunities and challenges, underscoring the need for radical reforms to improve the investment environment in the country. We may agree with some points raised in the report and disagree with others, and some of our disagreements may be structural and fundamental. However, what we must agree on is the urgent need for legal reforms that open the door for both local and foreign investors to benefit from the country's wealth, diversify its income sources, and lift it out of its "shopkeeper" state. Since the 1960s, Libya has done little more than play the role of a shopkeeper, selling oil to other countries, collecting the money, and then spending it at the whim of the ruling authority.
Libya possesses the largest proven oil reserves in Africa and ranks ninth globally in terms of oil reserves. Additionally, the country has the fifth-largest gas reserves in Africa and ranks fifth globally in terms of extractable shale oil reserves. These natural resources make Libya an attractive destination for investment in the oil and gas sectors, but the country also holds other resources capable of competing with these sectors as the state's most important sources of income.
In addition to oil and gas, the electricity and infrastructure sectors have significant potential to attract investments. Developing electricity networks and improving infrastructure, such as airports, ports, and roads, can contribute to enhancing the quality of life for citizens and creating new job opportunities. In previous years, Libyan governments signed agreements to harness the immense solar energy potential in the Libyan desert and other agreements to make Libya a gateway to Africa for the transportation of goods through its ports to its southern neighbors. However, these agreements have yet to come to fruition.
Other sectors, such as mining, industry, trade, and tourism, could also play a pivotal role in diversifying income sources and creating alternative job opportunities outside the bloated and inefficient public sector.
Despite Libya's considerable potential, the investment climate in the country faces numerous challenges that hinder achieving this goal. Among the most significant challenges are:
Complex Bureaucracy :
The unclear and complex bureaucracy is one of the biggest obstacles facing investors in Libya. The burdensome regulations and lengthy administrative procedures make it difficult for investors—whether local or foreign—to obtain the necessary licenses and start implementing their projects.
Division of State Institutions :
The ongoing political and administrative division between the east and west since approximately 2014 creates a state of instability and uncertainty, negatively affecting the government's ability to implement economic policies and reforms necessary to improve the investment climate. The decisions, procedures, and agreements of any government are only valid within its areas of influence, and given the fluidity of these areas and the vastness of the country, it is nearly impossible to establish large-scale national projects with significant economic returns without overlapping authorities between governments and their agencies.
Widespread Corruption:
Libya ranks very low in international indices measuring the investment climate and ease of doing business. In the 2023 Corruption Perceptions Index published by Transparency International, Libya ranked 170th out of 180 countries. In the World Bank's Ease of Doing Business Index, Libya ranked 186th out of 190 countries.
Corruption is one of the biggest challenges facing the investment climate in Libya, and it is no secret that corruption is rampant at nearly all levels of public administration. This negatively impacts investor confidence and increases investment costs, as businesses must account for the bribes they will need to pay to get things done, with no way to record these payments due to the lack of a corresponding value.
Security Threats:
Threats from armed groups pose a significant challenge to all investment projects in Libya. The murky security situation, lack of security stability, and the possibility of armed clashes erupting anywhere and at any time negatively impact the investment climate and increase the risks investors face. This unstable security environment makes it difficult for companies to protect their investments and ensure the continuity of their operations.
The Libyan Government's Record of Non-Compliance with Contractual Obligations
The Libyan government has a long record of non-compliance with contractual obligations and timely payments. This record negatively impacts investor confidence and makes it difficult to attract foreign investments. Investors need assurances that the government will honor its commitments and pay on time, whereas in Libya, companies have long had to pay large sums as bribes to officials, the ruling elite, and their entourages to obtain their financial entitlements.
The state's failure to find an alternative or support for oil as the country's primary source of income has left us all hostage to this sector. Regardless of the repeated closures of oil fields and ports in recent years, fluctuations in the global market alone could lead the government to a state of inability to pay citizens' salaries. Since more than three-quarters of Libya's workforce is employed in various state sectors, this alone should make improving the investment climate a national priority. To achieve this, immediate steps must be taken to reform the bureaucracy, simplify procedures, and overhaul the burdensome regulations for both investors and citizens.
The government must also work to improve coordination between the various state institutions to ensure the effective implementation of economic policies and necessary reforms. It must also prioritize fighting corruption and take steps to enhance transparency and accountability.
Additionally, improving the security situation is essential. Achieving security and stability can help protect investments and ensure the continuity of operations while also enhancing the government's ability to implement development projects and attract investments in various sectors.
The government must also improve its record in complying with contractual obligations and making timely payments, and it must stop corrupt individuals from obstructing companies from receiving their payments until they receive their commissions (bribes).
In conclusion, Libya possesses significant potential capable of effecting a radical transformation in the standard of living and livelihoods of its people. This potential needs only good governance to be harnessed for the benefit of the people rather than the ruling elite. Achieving good governance is challenging in the presence of a passive population that applauds the corrupt and calls for the execution of those who expose their corruption or demand that their hands be tied.